Delaware Business News by Doug Rainey: Unemployment

Unemployment in Delaware—It Could be Worse

Around the 20th of each month, Delaware’s Monthly Labor Report arrives via fax, Web or email.

The two-page snapshot of the state’s employment figures is watched closely by those looking for signs of life in the economy.

For George Sharply, Delaware Department of Labor Chief of Labor Market Information, the release of the figures brings calls from the media and interested parties, but not at the rate seen in 2008 and 2009. At that time, the state lost 20,000 jobs. An era of 3.5 percent unemployment rates became a fond memory.

“The jobless rate has fallen slowly,” Sharply says from his office at the Labor Department complex in Wilmington. He adds that the number of jobs continues to grow and that the unemployment rate has slipped below 7 percent.

That rate is well below the national figure, as job growth has continued in Delaware while stalling in a number of other states.

As for the lack of phone calls, it could have something to do with the lack of spectacular news—good or bad.

Regardless of interest from the media and public, a couple of years into the recovery, growth is continuing at a painfully slow rate.

It could be worse.

The unemployment rate peaked at 8.5 percent in January 2010, but never slipped into the Michigan-like double-digit rates that a few predicted after the state’s auto industry quickly went away with the closing of the General Motors and Chrysler plants.

The banking-financial services sector also stopped short of massive cutbacks, which could have added a point to the rate.

Of late, banking and credit card companies have pledged to add thousands of jobs while trimming staff elsewhere. Word on the street is that cuts will continue at banks, with new jobs filling the gap.

Even with the hiring announcements, Delaware’s pace of job growth trails the less-than-robust national figure.

Sharply says it is difficult to pinpoint the reasons for the sluggishness, other than the fact that the Delaware economy is so diversified, no single industry can spur a turnaround. By contrast, Michigan is seeing more rapid growth as auto and truck factories work to meet demand.

Moreover, Delaware, unlike a number of states, did not fall off the cliff when it came to job losses.

When asked to list a disappointing area for job growth, Sharply pointed to construction. Federal stimulus funds have disappeared, and the private market remains weak.

One reason for hope comes from numbers in home construction. A turnaround in home building and the residential real estate market would also help financial services companies, which hire staff when demand increases.

A positive trend is also emerging in manufacturing. “We seem to have arrested a long period of decline,” Sharply says. “Whether that continues remains to be seen.”

Sharply cautions against reading too much into employment figures for state workers. The state has not seen sharp cuts in its workforce, despite some figures to the contrary. The numbers are often fuzzy, due to the end of the public school year.

The view in some circles is that job cuts by budget-strapped governments are holding back the recovery.

Taking a dimmer view of the labor outlook is John E. Stapleford, director of the Center for Economic Policy and Analysis for the Dover-based Caesar Rodney Institute. The institute, which bills itself as a nonpartisan think tank, remains a persistent critic of state policies.

The institute has been in the headlines for its efforts to halt the Bloom Energy project, which would feed electricity from fuel cells into the state’s electric grid and lead to construction of a manufacturing plant at the former Chrysler site in Newark, now owned by the University of Delaware.

The organization claims new jobs at Bloom would be offset by businesses—not hiring—due to the higher cost of electricity driven by alternative energy mandates.

Recent blog entries from Stapleford point to energy policies and a decision to increase the state’s gross receipts tax a couple of years ago as factors that contribute to the stunted growth rate. Gross receipts is a tax on business sales in a state without a similar tax on consumers.

“There’s been some encouraging announcements from employers making significant commitments to putting more Delawareans to work,” says Markell. “But for us, as long as there is a Delawarean who wants to and is able to work but can’t find an opportunity, we’ll keep making the economy our top priority.”

As for the remainder of the year, Sharply says data points in the direction of slow growth, barring a financial collapse in Europe, war or other catastrophes.

If that forecast holds, Sharply won’t be flooded with calls on the 20th of the month anytime soon.